Jindal shows how not to replace Obamacare

It’s no secret that Republicans are divided both about how to replace Obamacare and about the urgency of coming up with an alternative plan. Louisiana Gov. Bobby Jindal has just escalated that internal debate – and shown why his side should lose it.

None of the potential 2016 Republican presidential candidates has thought more about the Affordable Care Act than Jindal, and none of the others has come up with a plan as detailed as his. Jindal’s key provision is to eliminate the tax break for employer-provided health coverage and instead offer a deduction with which people could buy insurance in the individual market.

The great flaw in Jindal’s plan is that it would cause millions of people to lose their coverage. Deductions are more valuable to those in high tax brackets, and they wouldn’t provide much help for the lower-income people whom Obamacare allowed to enroll in Medicaid. Many of the people now covered under Obamacare’s exchanges would also lose their coverage. And some of those now covered by their employers would find their plans threatened as younger and healthier employees used the new deduction to leave those plans for the individual market.

In a new op-ed, Jindal suggests that his plan has some advantages over other Republican alternatives. His target, though he doesn’t name it, is a proposal outlined last year by Sens. Richard Burr, Tom Coburn, and Orrin Hatch. That proposal would enable many more people to get coverage than Jindal’s plan would, because it would offer tax credits instead of deductions. And it would leave most people in employer-provided coverage safe because people could use the credit to buy individual coverage only if they didn’t have access to an employer plan.

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Jindal identifies two defects in the higher-coverage plan, which he calls “Obamacare Lite.” It would be more costly than his proposal. The way he puts it is that it would repeal only some of Obamacare’s taxes instead of all of them. And it would discourage work. The credits shrink with income, so people wouldn’t reap the full rewards for working longer or getting raises.

He’s right about the potential effects on work, which suggests that the senators’ plan should be modified: The credit should stay the same size regardless of income. If that adjustment were made, the plan would also be a bigger tax cut and thus Jindal’s other concern would be addressed.

Jindal suggests that an upcoming Supreme Court case, King v. Burwell, is a reason for Republicans to put forward their own healthcare plan, and he’s also right about that. The court may well rule that Obamacare’s subsidies for millions of people’s health-insurance plans are illegal. That decision, as Jindal says, could cause “disruption.”

But replacing Obamacare with Jindal’s plan wouldn’t do much to ameliorate that disruption, because the deduction wouldn’t be an adequate replacement for the vanished subsidies. It would even increase the disruption because of its treatment of employer-provided coverage. A response based on the senators’ plan would do much more to solve the problem.

Jindal is right to say that the Supreme Court case raises the stakes for Republicans trying to devise a replacement for Obamacare. It also highlights the unsuitability of his proposed solution.

Ramesh Ponnuru is a Bloomberg View columnist. Readers may send him email at rponnuru@bloomberg.net.